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802.11n wireless LAN access point market: Who's really in second place?

Wireless LAN vendors Aruba and Meru are arguing over which company holds second place in the 802.11n access point market. Both are citing the same research, but each claims that the data shows it to be the No. 2 player. Who is right? And does it really matter?

Meru Networks and Aruba Networks are squabbling over who has the larger share of the 802.11n wireless LAN access point market.

Cisco Systems remains top dog, as it does in so many markets, but both Meru and Aruba issued press releases this week claiming that they hold the second-place share of the market. Given that both companies cited the same market research, from Dell'Oro Group, someone has to be fibbing, right?

Well, maybe not. It's all in the eye of the beholder.

When one looks at the entire enterprise wireless LAN market, things haven't changed very much over the last several years. Cisco is the dominant player every quarter, with a share that hovers around 60%. Aruba has maintained a strong second place for a long time as well, with a share that usually swings back and forth between 7% and 9%.

But when you cut up the market into different segments, some new trends begin to emerge. For instance, 802.11n infrastructure sales are growing while sales of WLAN products based on old 802.11a/b/g protocols are flat or shrinking. Clearly, 802.11n products are the future of the market. In fact, sales of 802.11n access points have more than doubled since this time last year, from $25.8 million in 1Q08 to $61.9 million in 1Q09.

Rachna Ahlawat, vice president of marketing for Meru, said her company decided to highlight 802.11n sales this quarter given the fact that, as she describes it, 802.11n access points now represent about one-third of all access points sold. On Monday, Meru issued a press release claiming second place in the 802.11n access point market in the first quarter of this year, with 12.2%. Based on that measure, Meru is the No. 2 vendor of 802.11n infrastructure, behind Cisco's always dominant position.

Then, on Tuesday, Aruba issued its own press release claiming that Meru was mistaken. Aruba stated that it is the No. 2 vendor in the 802.11n access point space because when one combines its revenue with the revenue it generates through its OEM relationship with Alcatel-Lucent, it posted around a 12.7% share.

Michael Tennefoss, head of strategic marketing for Aruba, said his company doesn't necessarily think it's important to discuss shares of this particular segment of the larger wireless LAN market, but Aruba felt it had to correct the record.

Yet Ahlawat said research firms like Dell'Oro and IDC measure market share based on branding, and if Alactel-Lucent is selling Aruba gear with the Alcatel brand on it, that revenue should be credited to Alcatel.

"We have an OEM partner [reportedly Brocade], but that OEM partner works directly with Dell'Oro," she said. "Now if some company picks up the numbers and puts their own interpretation around their share and includes their OEM partners, what they're doing is taking the margin the OEM vendor makes on the shipments of the products and counting it to the original vendor, which is not typical financial reporting practice. In the market share industry, shipments are always branded shipments to determine the counting of market size and to attribute the share to the vendor that is actually selling those products."

Tennefoss disagreed.

"We spend a tremendous amount of time building up brand around Adaptive Radio Management, around Airwave, and other capabilities and features in our policy enforcement firewall," he said. "And those features are traded regardless of which vendor's name ultimately ends up on the product, because [those features] drive the numbers and they attract customers." "From our perspective," Tennefoss said, "it's an absolutely artificial divide to say, 'We're going to take the numbers that Aruba reports at the end of the quarter and we're going to allocate, as an analyst, some percentage here and some percentage there. And we're going to call them different market shares.' They were all shipped by us. They were all based on marketing … and patents and intellectual property that was driven by Aruba."

There is also some discrepancy between the breakdown of branded and OEM sales that Aruba supplied to Dell'Oro and what Dell'Oro ultimately published, Tennefoss said. He declined to go into details, but he said it would be corrected in Dell'Oro's next report. Aruba-branded 802.11n sales are higher than what Dell'Oro published, high enough to eclipse Meru, he said. If that is the case, this argument between Meru and Aruba about how to parse the 802.11n market is moot. However, it is still worth noting that 802.11n technology is driving most of the growth in the wireless LAN market. Clearly enterprises are starting to invest in the newer technology, and Aruba and Meru are definitely locked in a tight race for second place.

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Both companies make legitimate points in their arguments about who is the true leader in 802.11n access point sales, but what does Dell'Oro have to say about the squabble?

"We report revenue based on brand, so that's whatever brand is on the box," said Tam Dell'Oro, president of Dell'Oro group. "That's how we set up all of our reporting. Now, arguably you can look at it also by manufacturer. Who is the ultimate manufacturer of all this stuff, regardless of whether it's your brand or someone else's brand. So it's all a matter of how you look at it."

Does 802.11n wireless LAN access point market share really matter?

802.11n access points are a growing segment of the WLAN market, but they still make up only one component of a larger industry. In 1Q09, a down quarter, the WLAN market earned $201.8 million. That includes access points of all flavors, controllers and management devices. Dell'Oro said it's more important to look at the overall market, and in that measure, Aruba is firmly in second place, as it has been for a long time.

In reality, 802.11n is still a new technology. Many of the vendors in the WLAN market brought their first-generation 802.11n products to market in 2008, so the market is in flux right now. Dell'Oro said markets fluctuate a little at the beginning and then ultimately settle out. "Once they settle out, they don't change a whole lot. They remain fairly static," he said. "So if you want to get a sense of where the market share is, and how it might look a year from now, then I wouldn't look at one quarter. I would look at a few quarters, and then I would ask: 'Does this vendor have a technology that the others don't have, and is it at a compelling price?'"

Meru was the first vendor to come out with 802.11n products, and it has learned a great deal from its earliest deployments, Ahlawat said. "Our architecture works very well with 11n," she said. "We have learned what it takes to design a very good network. If you look at the other three vendors among the top four, they all bring in very similar architecture. They are all microcell based. There's not a lot of differentiation. When it comes to 11n, the challenges it has along with the promise it brings, our architecture is very well-suited for it."

Aruba, as you might expect, has a different opinion.

"802.11n is an indicator of the real-time status of the market, and that's clearly where the market is headed," Tennefoss said. "But there are large, important segments of the [enterprise] market that haven't moved to 11n. They are going to, but the performance of a wireless LAN vendor in this early stage of 11n is not an indicator of where they are going to be tomorrow. Those markets really haven't cranked up yet, and things like scalability and enterprise-grade security and other things that are essential … are missing from a lot of the smaller vendors. As those markets crank up, you can expect those smaller vendors who are missing those things to be laggards."

Time will tell who is taking control of the 802.11n market. The second quarter ended this week, and Dell'Oro and other research firms will report the latest results later this summer.

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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